Tag Archives: taxes

Ah, it’s tax season again! One of my favorite times of the year! Just kidding- I hate tax season. But it definitely helps to know what I’m doing before I file- and I have an accountant. But accountants can only do so much if I’m completely disorganized. So hopefully you have all your w2s/1099s in order and are ready to go. But are you taking the tax deductions you deserve?

Deductions are basically items you’ve paid for that somehow relate to the job you do. So if you’re self-employed and have a modeling business and you’ve bought a bunch of make up and hair products for shoots, those are deductions. But there are countless other deductions for every profession- and you don’t have to be self-employed to take them. Before I list them all,just a quick reminder about the standard deduction- that’s the amount you’ll get to deduct from your income if you don’t itemize deductions separately. So you’ll always get to deduct something.

For example, if you made $40,000 this year and are filing as a single person or are married filing separately, the standard deduction for 2016 is $6,300. So it’s as if you only made $33,700 this year- and will only be taxed on that $33,700. So if you don’t have itemized deductions totaling more than $6,300, then you should take the standard deduction and that’s that. The standard deduction if you’re married and filing jointly is $12,600, and if you’re filing as head of household (meaning you have a dependent), your deduction is $9,300 this year.

So if you think you can possibly itemize deductions adding up to more than that, here are a few deductions you can try:

-Do you own a home? There are deductions you can take that relate to your home including what you’ve paid in property taxes, interest on a home equity loan, and possibly any home improvements made for medical care.

I’m currently working in Detroit and just was thinking about when I’d have some time to change a twenty for a bunch of ones when a friend of mine posted on Facebook asking about how, for her taxes, she can deduct cash tips she paid out while traveling.

I realized that I didn’t exactly know the answer to this except that my usual way of deducting the tips I pay out to people in cash is mild guesswork. I know that when I travel for work I almost always tip housekeeping about $2-$3 a day. I rarely use a bellboy to bring my suitcases anywhere, but maybe would use one approximately 4 times a year in order to help me carry something or other up, and tip $2-$3 each time. I’d tip a shuttle driver about $3 about 8 or 9 times a year. Etc, etc.

Make sure you deduct your cash tips to hotel or transportation staff anytime you travel for work. The tips are actual valid deductions. If you’re self-employed, these are no-brainer bona fide travel expenses. But even if you’re not self-employed, if you end up traveling for work, the tips you pay in cash while traveling can absolutely be deducted if you’re itemizing deductions.

The deduction would be under ‘business travel expenses’ and the way you would note them in your records would be to write the tip amount on some form of receipt related to the trip in question. So, for example, if you tipped housekeeping and the bellman during a business trip to Detroit, you would get the hotel receipt (even if it was $0.00 because your company paid for the hotel) and write the cash amount paid on the sheet of paper. Then you would keep that for your records.

This may seem like nickel and dimeing, but these deductions are valid and can really add up, so you might as well take them if you travel a lot for work and are itemizing your expenses.

In our thirties, we should try our darndest to get better at doing our taxes the best we can, so we can keep the most money. We might as well- why lose the money you’ve worked so hard to earn?

View from my hotel in Detroit. I’m here for 16 days, and a lot of tipping happens in all that time.

It took me forever to understand the difference in these terms (they’re slippery). If you can grasp them, you’re miles ahead of the tax curve..so let’s start 🙂

TOTAL INCOME: So let’s say you’re single and you make $60,000 total this year in income, including every penny that goes in your pocket. That’s your total income.

ADJUSTMENT (also known as ABOVE THE LINE deductions): Now, let’s say you paid $1,500 in student loan interest this year and contributed $3000 to a traditional IRA (retirement account). No matter whether you decide to take the standard deduction or itemize your deductions (both standard deductions and itemized deductions are known as Below the Line Deductions), you can subtract your student loan interest of $1500 and the traditional IRA contributions of $3000 from your total income! This is because they are adjustments. And adjustments are great! So your Adjusted Gross Income would be $55,500. ($60,000 – $1,500 – $3000 = $55,500).

To clarify more regarding adjustments, let’s say you still made $60,000 in total income, and you still paid $1,500 in student loan interest this year and contributed $3000 to a traditional IRA. But you also gave $500 to charity and paid $1000 in medical expenses. If you took the standard deduction on your taxes ($6,300 this year for single filers), you would still able to subtract the adjustments (student loan interest and health insurance contributions) from your total income but couldn’t subtract the $500 given to charity and the $1000 in medical expenses because they count as itemized deductions. If you itemized your deductions, you could subtract the student loan interest, retirement account money paid, AND charity donations AND medical expenses. This doesn’t mean that you should itemize though- only itemize if your itemized deductions exceed $6,300 (the standard deduction) this year!

CREDIT: So far, we’ve only talked about subtracting from your total income. How about subtracting from your tax bill? Sound good?

So lets say you have to pay $6000 in taxes. If you have a credit, it will reduce that bill dollar for dollar. So if you have a $2,000 credit, your tax bill will be $4,000 (6,000-2000). Credits are the best to have but also the hardest to come by. Credits you could possibly take include the Credit for Child and Dependent Care expenses, the Child Credit, and education credits (like the Lifetime Learning Credit and the Hope Credit).

Let’s illustrate all of this below:

Total income (sum of all your income)
— Above the line deductions
= Adjusted gross income ← “The Line”
— Standard deduction or itemized deductions
— Exemptions (you can always take an exemption for yourself, and then more for your dependents. Right now the exemption per person is $3,950.)
= Taxable income

Oh man, it’s getting to be tax time soon. Has anyone already filed their taxes? If so, good for you! Kudos!

I’m still working in Chicago right now and won’t be able to get all my 1099s together and ready for filing until I get back to New York. I have things moderately organized, and I even have an accountant, but my tax preparation still requires quite a bit of effort- especially since I sometimes end up with over a dozen 1099s per year (!)

In honor of the advent of tax season, and taxes starting to be on the forefront of everyone’s mind, I’ve compiled a list of common tax questions that are relevant to those of us in our thirties. The first few are pretty basic ones which you may have already figured out, and then they get slightly more detailed. Of course, tax answers are rarely simple, so you should make sure to triple check everything for your own personal situation. And I’m splitting this into sections, so you’ll get more tax question and tip articles as April 15th approaches.

1. Should I use tax software this year? Which program?

I used to use H&R Block’s tax software, which I think is pretty good. It’s about $20 for a basic program, and $65 for self-employed software.Turbotax is also quite popular- and it’s base cost is free. Once my self-employment taxes started to get really complex, I hired an accountant.

2. Should I get an accountant?

Only you know whether you need an accountant based on your personal situation. However, I think you can almost definitely make do with simple tax software if you are an employee with only one job and all you need to file is your w2. If you have side income from anything (rental income, side jobs, etc), you may want to consider an accountant- however, I think you still may be able to use tax software successfully. If you’re self-employed, I recommend considering an accountant, if only to protect yourself from accidental audit triggers. You can even find accountants on Yelp now. My goodness, I love Yelp.

3. How much do accountants cost?

CPA’s (Certified Public Accounts) charge anywhere from $150-$400 or more. But you can definitely get a great accountant for less than $400…read those Yelp reviews. A funny bonus of having an accountant is that your tax prep fee is actually tax deductible!

4. Does last year’s tax refund count as income this year?

The answer to this is almost always no if you took the standard deduction. If you itemized your deductions, it may count as income- look into it.

5. What documents do I need to do my taxes?

You need all your w2s (if you work only one job, you’ll have only one w2).

You’ll need all your 1099s if you’re self-employed or have side income.

Also, it’s important to have documentation of any interest you made on any of your savings or investments (you get taxed on this).

Additionally, you’ll need documentation of any interest you paid so you can deduct that from your taxable income (the interest paid on student loans, etc, is tax deductible). Also, if you’re itemizing deductions, you’ll need your receipts, or a spreadsheet of your receipts if you made one. (You won’t actually need to show anyone the actual receipts (except your accountant) unless you’re audited.)

6. If I made very little money this year, do I still have to file taxes?

Officially, for 2014, if you’re under 65 and filing as single and independent, you don’t actually have to file your taxes if you made under $10,500. If you’re married and filing jointly and under 65, the number is $20,300. Here’s a chart with more details. However, you may still want to file taxes for several reasons- one of which is that if you had taxes withheld, you can’t get your tax refund without filing. Here are a few other reasons.

7. What are some deductions I can take to help reduce what I’m paying on my taxes?

Have you deducted the interest you’re paying on your mortgage or student loan debt? Have you deducted your health care costs? Did you spend lots money to move for your job? There are some great deductions you may not be using to your advantage. Mashable goes into fantastic detail on this here.

Hope this has helped you with some of your questions- feel free to comment below with additional ones- I’d love to hear from you! Look out for more tax info here soon, and good luck filing!

Roth IRAs should be simple. Yet they seem super complicated. This is because no one really talks Roth IRAs at dinner parties and the internet info on them is a mess to find. So lets have a simple talk about where to open a Roth so you can just open your retirement account and be done with it!

Before I opened my Roth IRA, I spent crazy amounts of time stressing about which Roth IRA was best. Hours went into my research and I almost gave up on opening one, because answers seemed so hard to find! Why are these kind of important financial decisions so difficult to figure out?

Let’s begin at the beginning. I explained in this post and also this one why you should open up a Roth IRA as opposed to a traditional IRA, and also why you should open up a Roth IRA even if you have a 401K. Retirement accounts are always best started sooner than later, so the first step is to stop procrastinating as you figure out which one is best, and get one opened up ASAP. But which one?

This is not a good place for an IRA.

I’m going to break this down in the simplest way I think is possible. Here goes.

Basic Steps

Step 1) You are looking for a Roth IRA with THE LEAST AMOUNT OF FEES INVOLVED.

Do you want to pay excess fees on an account holding your own money? I didn’t think so.

Step 2) The Roth IRAs that can be found with the least amount of fees are at DISCOUNT BROKERAGES or NO LOAD MUTUAL FUND companies.

A discount brokerage, as opposed to a full-service brokerage, is offering services to you at a DISCOUNT. This is very good. A no load mutual fund company is a company where you won’t pay extra fees (known a SALES LOADS). Yay for discounts and no extra sales fees!

Step 2.5) Don’t open your Roth IRA at a BANK!

This is a common error! There are heavy fees involved at banks! Just because you love your Chase or BoA debit accounts does not mean these are good places to open your Roth IRA. Just don’t do it!

Step 3) Should you choose a No Load Fund or Discount Brokerage?

If you’re a beginner or less experienced with investing and Retirement Accounts, I recommend going with a No Load Fund Company. If you’re more experienced, you’ll probably like discount brokerages better.

4) Here’s simple a list of what I found in my research to be the best, most recommended DISCOUNT BROKERAGES and NO LOAD MUTUAL FUND companies, and their websites:

Step 5. Now that you have the above list, which one should you choose????

Too many options still, right??!!! I felt that way. So I’m just going to give you the answer! Wow!

Just kidding. There’s no one answer, of course, I can’t claim that…different strokes and all. But I’m still going to tell you what I think is best:

My favorite place to open an IRA for beginners is Vanguard…they are the most recommended out of all the Roth IRA companies I’ve researched. I have my Roth IRA at Vanguard. They are great. Awesome customer service and easy to use website to manage everything.

6. Okay, so now that you’ve picked a place to open a Roth IRA, which fund should you choose within the company you’ve picked?? There are sooo many…

I recommend opening up what’s called a Target Date Retirement Account. Vanguard has one. T. Rowe Price has one. They’re everywhere. This account is great because it enables you to basically pick the year you’ll retire and set up a retirement account on autopilot. These accounts are pretty diverse (which is a really good thing), so you won’t have to delve into a complicated mess of diversifying to start with. I’ll write more about these accounts later, but if you’re just starting, they’re great. Usually you need about $1000 to start one of these. (I started one at Vanguard for that much. Some of the other companies may be even less.)

7. Ok, so to recap- go open up your Roth IRA now!

You don’t need a lot of money to start. If you don’t have $1000 to start, begin putting money aside. Go for the Target Date Retirement Fund at either Vanguard or one of the other No Load Companies or Discount Brokerages- you can always change that Target Date Fund to something else later when you have more money invested and more knowledge of how retirement funds work.

8. Was this confusing?

Please ask questions! I love them, and they’ll help me too! Also, below are a list of the best articles I’ve found during my research- hopefully they’ll help you out as well!